Interest-Rate Rules in a New Keynesian Framework with Investment - Pavlova, Elena (Lang, Peter, GmbH, Internationaler Verlag der Wissenschaften, 2012)
3.3.3. Consumption preference unit shock 132
Table of Contents; List of Figures and Tables 11; List of Symbols 13; I. Introduction 17; II. Monetary policy design and criteria for assessing monetary policy rules 21; 1. Monetary policy issues 21; 1.1. The case for rules rather than discretion 23; 1.1.1. Analytical distinction between rules and discretion 23; 1.1.2. The problem of dynamic inconsistency 24; 1.1.3. Advantages of central bank commitment to a monetary policy rule 25; 1.2. Design of monetary policy rules 26; 1.2.1. Rules, instruments and targets 28; 1.2.2. Choice of instruments 30; 1.2.3. Choice of target variables 31
2. Criteria for assessing monetary policy rules 372.1. Operationality/Simplicity 38; 2.2. Local determinacy of rational-expectations equilibrium and monetary policy analysis 41; 2.2.1. An overview 41; 2.2.2. Presenting the criterion 42; 2.2.3. Determinacy and reactions to shocks 43; 2.3. The Taylor principle 45; 3. Preliminary summary 49; III. A New Keynesian model with endogenous capital with adjustment costs 51; 1. New Keynesian framework: an overview 52; 2. Modelling capital and investment 55; 3. The model with endogenous capital and adjustment costs 60
3.1. Household utility function and optimality conditions 603.2. The "IS sector" 63; 3.3. Capital accumulation adjustment costs 64; 3.4. Inflation and real wage equations under sticky prices and wages 66; 3.5. Interest-rate rule specifications 67; 4. Determinacy analysis 68; 4.1. Calibration 69; 4.2. Determinacy and the Taylor principle: some numerical examples 72; 4.2.1. Active rule 74; 4.2.2. Passive rule 75; 4.2.3. Interest-rate rule response coefficient values and determinacy: a global perspective 77; 5. Preliminary summary of results 79; IV. Shock impulse responses 81
1. Some preliminary remarks on the adjustment mechanisms in the system 811.1. Monetary policy unit shock 82; 1.2. Technology unit shock 84; 1.3. Consumption preference unit shock 86; 2. Active rule 87; 2.1. The case of inflation-targeting only 87; 2.1.1. Monetary policy unit shock 88; 2.1.2. Technology unit shock 92; 2.1.3. Consumption preference unit shock 95; 2.2. The case of inflation- and output-targeting 98; 2.2.1. Monetary policy unit shock 98; 2.2.2. Technology unit shock 101; 2.2.3. Consumption preference unit shock 104